Essay
Jezz has the quasi log-linear utility function
U(q₁,q₂)= q₁ + 2ln(q₂)
Jezz has an income of $100 and faces prices p₁ = p₂ = 20.
a.What is the marginal rate of substitution for this utility function?
b.Solve for Jezz's optimal bundle.
c.Suppose Jezz's income falls to $20.What will happen to his optimal bundle? Is the MRS=MRT at the optimal bundle?
Correct Answer:
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a.MRS = U₁/U₂ = 1/(2/q₂)= .5q₂
b.Set MRS...View Answer
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Correct Answer:
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b.Set MRS...
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